Do Startups Need Business Insurance?
Your business is new but there is still plenty to protect and liability to consider. Even though you work at an exciting startup, you still need to follow some conventional advice and get business insurance. What kind should you get? General liability insurance, business property insurance and business owner’s policy and cyber security insurance are good great coverages to consider. And don’t forget about workers’ compensation for your employees. Why do you need insurance? To protect yourself and the money you earn!
General Liability Insurance. General liability insurance protects you if you cause any damages whether it be bodily damage or damage to the client’s or other’s property. This insurance provides your business with financial protection should you be hit with a legal claim. Accidents, injuries and claims of negligence all can happen and general liability insurance is one way to be protected.
Liability insurance is typically structured to cover financial settlements as well as the legal costs involved with defending lawsuits.
Events covered by liability insurance include accidents and injuries that occur on business property or stem from its business operations, medical payments for minor injuries sustained by visitors to company property, and liability for damage to another’s property in the course of doing business.
Most employers require general liability business insurance. So if you have a small contracting business, employers would want you to have general liability insurance before signing contracts and doing business with you. Consider general liability insurance as an essential part of your business. Make it the first insurance that you buy.
Business Property Insurance. A business property insurance policy protects your building and all its contents including exterior fixtures and outdoor signs and fences from fire, explosions, hurricanes and tornadoes and other storms, theft, burst pipes and vandalism. Business property insurance also covers company-owned equipment, computers, furniture and inventory. So if you own a commercial building this type of insurance is for you. It will protect your investment in your business property.
Property insurance can be part of a business owner’s policy (BOP) (see below).
Business Owner’s Policy. A business owner’s policy extends general liability coverage to protect things such as commercial buildings and personal property. A BOP helps cover your business from claims such as fire and theft. BOP also covers claims that rise from the operation of your business including claims to property damage or bodily injury. BOP is a good policy for startups because BOP bundles different types of business insurance together, saving money.
Workers’ Compensation. If you’ve got employees, workers’ compensation is a must and it is required in most states. Workers’ compensation offers insurance coverage for when employees become ill or injured while on the job. Workers’ compensation covers employees’ medical costs and a portion of their lost wages. So if you are thinking of expanding your startup from one person to two or three or even more, you will need to get workers’ compensation insurance.
Product Liability Insurance. If your startup company manufactures or sells products then you will need product liability insurance. Product liability insurance protects your startup business against a lawsuit should a customer claim a product that you sold or manufactured led to injury or property damage. No one wants this kind of lawsuit to happen but it is good to be protected just the same. So add product liability insurance to your list of insurance coverages to buy.
Commercial Auto Insurance. If you or any of your employees use a motor vehicle for company purposes then a commercial auto policy should be added to the insurance that you buy for your startup business. This insurance will protect you should an accident happen with the vehicle and you or your employee are found to be at fault. A commercial auto insurance policy covers the motor vehicles that you own, lease, or rent for your business. A standard auto policy will not cover you if you are in an accident while in transit from conducting business.
Professional Liability Insurance. Any professional who has expertise in a specific area warrants professional liability insurance because general liability insurance doesn’t offer protection against claims of negligence, misrepresentation and malpractice brought forth by clients. Professional liability insurance is called medical malpractice in the medical field and and errors and omissions for real estate agents. A professional liability insurance policy can be customized to fit your startup business. It can protect you from negligence claims stemming from mistakes or failure to perform. So consider this policy a must for your fledgling startup business.
Business Interruption Insurance. Also known as business income insurance, business interruption insurance covers the loss of business income following a disaster. The disaster may cause the closing of the business and result in a rebuilding process. Having this business interruption insurance will help your startup business bounce back from a disaster. The most common causes of business interruption are fire and flood and having business interruption insurance will protect your startup business from both.
Cyber Security Insurance. Cyber security insurance protects your startup business from computer-related crimes and losses, including data breaches, phishing schemes and ransomware attacks. A cyber security insurance policy covers both privacy and data exposures. This type of insurance is a must for online businesses but any business can benefit from this type of insurance coverage including small business startups.
Home-Based Business Insurance. This is business insurance for businesses that are run out of a business owner’s personal home. Home-based business insurance gets added to a homeowner’s insurance policy as a rider. It offers protection for a small amount of business equipment and liability coverage for injuries to third parties. This insurance makes sense for the earliest days of a startup before business office spaces have been rented and lots of employees have been hired on. If your startup is you and you are working from your home, consider protecting your home-based business with this kind of insurance.